Stock Prices and Institutional Holdings. Adri De Ridder Gotland University, SE Visby, Sweden

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1 Stock Prices and Institutional Holdings Adri De Ridder Gotland University, SE Visby, Sweden This version: May 2008 JEL Classification: G14, G32 Keywords: Stock Price Levels, Ownership structure, Institutional holdings Corresponding author: Adri De Ridder, Gotland University, SE Visby Sweden

2 Abstract In the absence of market frictions, investors should be indifferent to price levels of stocks. By using a unique data set, reflecting total ownership structure in Swedish firms listed on the Stockholm Stock Exchange, I analyze institutional holdings after controlling for firm size and stock price. I find that institutional holdings increase with firm size. Overseas investors have also more relative holdings in firms with low stock prices compared to high stock prices. The estimates of the cross-sectional analysis are consistent with Merton s theory of capital market equilibrium where investors have incomplete information. 2

3 1. Introduction In May 1974, the retailing company Hennes & Mauritz had an initial public offering on the Stockholm Stock Exchange (SSE) in Sweden with an offer price of 375 SEK per share representing a market capitalization value, at that time, of 81 million SEK. As of the end of 2007, market capitalization was billion SEK (representing an annual compounded growth rate of 28.1 percent per year) and a stock price of 350 SEK. Over the thirty-three year period the company also split the stock several times and if no splits had been performed over the period, the price of one single stock should had been 1,327,861 instead of the 350 SEK! Obviously, management of the firm seems to have some views about what the absolute stock price level should be. Why do firms use stock splits to move their share price to a trading range which are associated with higher transaction costs, and why should it affect ownership structure? In theory, a stock split is just an accounting change, which leaves investors no better or worse off than they were before the split. As stock splits are a common corporate event, there must be some benefits associated with the split. A lower stock price will attract more noise traders and thus increase volatility as argued by Black (1986). Lower stock price levels will also attract individual investors as they tend to be wealth constrained and cannot afford to buy a round lot of a firm s stock if the price is too high. This can be illustrated by data from one of the largest firms listed on the SSE, the telephone company Ericsson. As of the end of December 1999, the firm s stock price was 559 SEK. Three years later, following the bubble, the stock price was down to 6.23 SEK. Over the same period, total number of individual shareholders increased by 213 percent, local institutional investors by 157 percent and overseas institutional investors by 132 percent. If this change in share holdings in Ericsson is relevant, stock price levels matter. 1 In prior literature of stock price levels, there is no clear evidence whether local institutional investors have different opinions of the price level compared to overseas institutional investors. However, there seems to be empirical evidence that nominal prices of common stocks in the U.S. have remained constant at around $30 per share over a long period of time, see Benartzi et al. (2005). Stock price levels have also been examined by Dyl and Elliott (2006) who report that stock price levels vary across firms but also 1 In February 2008 Ericsson announced a reversed split with the split factor -0.2 indicating that five old shares will be replaced by one share. 3

4 depending on the exchange the share is listed. For firms listed on all exchanges in the U.S. (NYSE, AMEX and NASDAQ), the mean (median) stock price is $18.23 (12.95) and with 40.4 percent of the firms having a stock price of less than $10. In contrast, 1.6 percent of all firms have a stock price level greater than $70. For firms listed on the NASDAQ, the mean (median) stock price is $13.24 (9.52). More than 50 percent of the firms listed on NASDAQ are associated with a stock price of less than $10. In August 1991, NASDAQ introduced a new listing agreement with a minimum bid price standard of $1 per share and thereby forced many firms to undertake a reversed stock split to avoid delisting. Individual as well as institutional investors seem to care about share price levels. An early study by Brennan and Hughes (1991) argues that the negative relation between brokerage commissions and price levels provides incentive for stock brokers to produce more information about low-priced stocks. Falkenstein (1996) studies holdings by mutual funds and argue that managers have preferences for stocks with high visibility and low transaction costs. Angel (1997) studies the relationship between stock price and tick size and develops a model where lower prices and higher relative tick sizes provide incentives for stock broker firms to promote the stock. Lipson and Mortal (2006) combine stock splits with tick size and report that post-split prices have not declined even with reduced tick sizes and argue that binding tick size is irrelevant. In his presidential address at the American Finance Association Annual Meeting, Merton (1987) argues that a firm can reduce its cost of capital by broadening the base of investors as investors only are aware of a subset of firms in the universe. In a cross section analysis of the U.S. market, Dyl and Elliott (2006) empirically test Merton s model and find that roughly two thirds of the variation in share prices can be explained by firm size, average holdings by all shareholders, and earnings per share in firms. In other words, firms appear to manage their share prices to increase the firm s investor base and thereby also increase the value of the firm. 2 The well known home bias in finance implies that the proportion of overseas assets held by domestic investors is small relative to the universe of all securities traded. This home bias is analyzed by Kang and Stultz (1997) who report that overseas investors investing in Japan underweight smaller and highly leveraged firms. The home bias has also been examined in Sweden by Dahlquist and Robertsson (2001) who analyze the 2 Amihud, Mendelson and Uno (1999) report that following the reduction in minimum trading unit (lot size) in Japan, increases the number of shareholders but also stock prices. 4

5 determinants of overseas ownership in Swedish firms over the sample period 1993 to 1997 and find evidence that overseas institutional investors have preferences for large firms, firms with low dividend yields, and also firms with large cash positions. In this paper, I contribute to the existing literature by providing additional evidence of stock price levels and links to Merton s theory of capital market equilibrium where investors have incomplete information. More specifically, I introduce domiciles of institutional owners into the analysis and examine if overseas investors have different preferences for stocks with different stock price levels relative to local investors. This contribution is important as prior studies do not distinguish between individual or institutional investors nor domiciles. By using a superior data set of complete holdings of shares in Swedish firms, I examine to what extent local and overseas institutional investors are under or over-weighted relative to the weight in the market portfolio for firms after controlling for firm size and stock price level. On average, I observe that mean holdings by local as well as overseas institutional investors increase by firm size. After controlling for firm size as well as stock price level, I find that local institutional investors have stronger preferences for firms with high stock prices compared to overseas institutional investors. Overseas institutional investors are also, on average, more over-weighted in firms with low stock prices after controlling for firm size. In a regression analysis I find support for the hypothesis that lower share prices on average are associated with smaller firms and vice versa but also that wealth constraints result in smaller (larger) investors investing in firms with low (high) stock prices. Of interest is the finding of a negative correlation between share price and domiciles of investors. Overall, the findings are consistent with Merton s theory of capital market equilibrium where investors have incomplete information. The remainder of this paper is organized as follows: Section 2 describes the data and methodology, Section 3 presents the empirical results, and Section 4 concludes with a discussion of the results. 2. Data and Methodology The primary source for data covering holdings in firms on the SSE during the period 1999 to 2006 is obtained from the central security depositary in Sweden. In contrast to many 5

6 other countries, ownership structure in Swedish public firms is monitored by law by the Nordic Central Securities Depositary (NCSD), a firm owned by Swedish banks and stock broker firms. Starting in 2006, total ownership structure in each firm must be recorded at the end of each quarter; prior to that shareholdings were recorded twice a year (end of June and December). Thus, on each record date the complete ownership structure of each firm is compiled. For each sample firm I compute total holdings by local and overseas institutional investors. If a firm has issued several classes of shares (mainly with different voting power), holdings are given for each share class. In the analysis, I first compute total number of shares held by each group. This figure is then divided by the total number of outstanding shares to obtain the fraction of shares owned. In the analysis, I compare ownership levels for local and overseas institutional investors as of the end of December for each year over the sample period. For each firm, I also compute market capitalization, defined as total number of outstanding shares multiplied by the stock price. I also examine whether local or overseas institutional investors are under or overweighted in firms after controlling for firm size and stock price level. Thus, for each firm I add all shares held in a firm by local and overseas institutional investors respectively. I then calculate the value of this holding by multiplying the number of shares with the stock price. Likewise, I calculate total holdings by local and overseas institutional investors across all firms listed on the SSE. I then compute the ratio of the weight of firm j in the portfolio held by local and overseas institutional investors to the firm s weight in the market portfolio. Thus, a ratio less than one indicates that the firm is underweighted and a ratio greater than one indicates that the firm is over-weighted by each group respectively. A ratio of unity indicates that holdings correspond to the firm s market weight in the market portfolio. 3. Results Table 1 presents summary statistics of stock prices (both in SEK and US-dollar) and its dispersion for firms listed on the SSE over the full sample period 1999 to As reported in Panel A, the mean (median) stock price is (58.69) SEK respectively. Also, 16.9 percent of all firms have an average stock price of less the 10 SEK whereas only 6

7 2.6 percent of the firms have a stock price larger than 300 SEK. In Panel B, I report the dispersion but have converted the SEK to US-dollars. As shown, the mean (median) stock price for the sample firms is (6.82) US-dollars respectively for the sample firms. Note that for 41.9 percent of all firms have a stock price of less than $5 and 19.4 percent of all firms have a stock price between $5 and $10. In short, most firms listed on the SSE seem to have a stock price of less than $10 whereas only 1 percent of the sample firms have a stock price above $50. Table 2 reports stock prices, firm characteristics, and institutional holdings for each of the calendar years over the sample period. As reported in Panel A, mean (median) stock price in SEK varies between (29.94) representing 2002 to (92.21) for year In US-dollars, the mean share price varies between $6.17 (2002) and $15.53 (1999). The median stock price level in US-dollars in Sweden in 2001, $4.33, is substantially lower than the median stock price level of $12.95 as reported for all firms listed on NYSE, AMEX and NASDAQ by Dyl and Elliott (2006). Summary statistics of institutional holdings is presented in Panel D through I. Mean local institutional holdings over the total sample period (not reported ) is percent and is fairly stable over the sample period. For overseas institutional holdings, mean holdings (not reported) is percent and vary between percent (1999) and percent (2006). Mean holdings in value for local and overseas institutional investors is reported in Column H and I. As shown, mean holdings by overseas institutional investors were higher in four of eight calendar years (1999, 2000, 2002 and 2005). In short, the findings suggest that the difference in holdings by value between local and overseas institutional investors is not substantial. As highlighted by Merton s incomplete information argument, existence of prudentinvesting laws and traditions can exclude investment by investors. For example, some overseas pension funds are not allowed to invest in firms with a stock price level of less than $3. In addition, funds can be prohibited from investing in firms which do not belong to the largest or most traded firms on an exchange. Some funds are also excluded from investing in specific industries and in firms with widely dispersed ownership. Del Guercio (1995) reports differences in compositions of portfolios managed by bank managers and mutual fund managers. Thus, it is of interest to examine if there is a difference in investments by local and overseas institutional investors after controlling for firm size. I 7

8 proceed as follows. For all sample firms, I first compute market capitalization value. I then rank them and form three groups based on firm size (low, medium, and high). In the analysis I focus on four variables: (a) mean holdings in percent (cash flows), (b) mean holdings in value, (c) ownership concentration, measured by the Herfindahl (in votes) for the largest shareholder; and (d) mean number of institutional investors. To examine whether the reported means are significantly different across high and low market capitalization firms, a paired t-statistic tests the hypothesis that paired differences have the mean zero. Table 3 reports the outcome of the univariate analysis. The results suggest significant differences between small cap and large cap firms for three of my four control variables when we examine local institutional investors (Panel A). Smaller firms have lower local institutional ownership, lower institutional holdings in value and also fewer institutional investors. Panel B of Table 3 shows the outcome for overseas institutional investors. As shown, mean holdings increase by firm size and overseas institutional hold similarities to local institutional investors although their mean holdings in large cap firms are lower (32.73 and percent respectively). However, when holdings are measured in value, the mean size for local and overseas institutional investors are roughly the same (9,438.3 and 9,407.2 million SEK respectively). Prior work suggests conflicting evidence between institutional holdings but also preferences for stock price levels. In the absence of market frictions, investors should be indifferent to stock price levels. To examine if this in fact is the case, I start by pooling all firm observations over the sample period and then compute market capitalization value of each firm. I then rank the firms and divide the sample into quintiles where quintile 1 contains small firms and quintile 5 contains large cap firms. Within each quintile, I then sort the firms into quartiles based on the stock price. The null hypothesis is that the difference between the high and low stock price groups is zero. In the analysis, I pay attention to two variables, mean holdings (in percent) and mean relative holdings. Prior research of ownership of Swedish firms, e.g., Dahlquist and Robertsson (2001), document that overseas investors have preferences for large cap firms with cash positions and specifically for firms which have a dual listing overseas or substantial export sales. The result of local and overseas institutional holding is presented in Table 4. As shown, mean holdings increase with firm size. For instance, local institutional holdings in small cap 8

9 firms (size quintile 1), and for high priced stocks is percent and increase to percent for large cap firms (size quintile 5). Further analysis shows also that the difference in holdings between low and high priced stocks is statistically significant across the quintiles. For overseas institutional investors, mean holdings in small cap firms and high priced stocks are percent and increase to percent for large cap firms with high stock prices. Thus, local as well as overseas institutional investors prefer holdings in large cap firms. Overall, the results suggest that institutional holdings increase with firm size but also that a firm s stock price rises with institutional holdings which is also consistent with the empirical evidence presented by Fernando et al. (2007). Next, I analyze the relationship between relative holdings by local and overseas institutional investors where I also control for firm size and stock price. As shown in Table 4, local investors deviate from the relative weighting for the first four quintiles. For instance, the data indicates that local institutional investors are underweighted in small and medium cap firms; the mean relative weight in the first quintile and for low priced stocks is On the other hand, for large cap firms, they are over-weighted in the group with the highest stock price levels with a mean value of Also, the difference between high and low priced stocks is statistically significant. Of interest is the finding that overseas institutional investors in general are underweighted in firms listed on the SSE. Note however, that the degree of underweighting decreases as firm size increases but stock price declines. Apparently, the data provides evidence that local institutional investors have preferences for high priced stock whereas overseas institutional investors have preferences for low priced stocks after controlling for firm size. From the analysis so far, we know that local and overseas institutional investors have preferences for stocks in firms with high market capitalization value. To examine the determinants of share price levels, I estimate the parameters of the following regression model: Price i,t=α 0+β1Assets i,t+β2hldgs i,t+β3ovslocal i,t+εi,t (1) where Price is the log of the price of a share in firm i at period t, Assets is log of total assets in firm i at period t, Hldgs is the log of average holdings (in value) of each shareholder in firm i at time t and OvsLocal is the ratio between overseas to local institutional holdings, and ε is an error term. The first control variable is thus a proxy for 9

10 firm size, note also that I use book value of assets rather than market capitalization to avoid any spurious correlation. The second control variable captures the mean value of investments in the firm by all shareholders and is defined as total market capitalization divided by total number of shareholders. 3 The third control variable gives the ratio between overseas and local institutional holdings. If holding by these two groups is the same, then the ratio is equal to one. In the estimation, I use annual data over the sample period 1999 to Stock prices are as of the end of December each year and obtained from the Stockholm Stock Exchange. Data on book value of assets and equity is obtained from Datastream. As previously mentioned, detailed data on ownership in sample firms is obtained from the NCSD-group. For some smaller firms the ratio between overseas and local institutional holdings is substantial and can be explained by overseas holdings representing the founder of the firm. Hence, to reduce the effects of outliers I have truncated my data at the 1 st and the 99 th percentile respectively. As outlined in Merton s model, an increase in the size of a firm s investor base will reduce the investors expected return and hence, increase the market value of the firm. Thus, in addition to a domestic as well as an overseas listing, managers can also approach overseas potential investors and thereby increase the firm s investor base. The results for the cross-sectional regressions covering the sample period 1999 to 2006 are presented in Table 5. White (1980) heteroskedasticity-consistent t-statistics are presented below the estimated coefficients. The estimated coefficient on firm size (Assets) is positive and also statistically significant and varies between (1999) to (2002) and is also consistent with the view that lower share prices are associated with smaller (unknown) firms whereas larger, and well known firms, have higher share prices. The second control variable (Hldgs) captures the average investment per shareholder, local as well as overseas institutional investors as well as domestic individuals. As reported, the estimated coefficient is positive in all regressions and statistically significant in six of the eight years examined. Thus, investors with capital constraints ( small investors ) prefer to invest in firms with low share prices and vice versa. The estimated coefficient on the relative size of overseas to local institutional investors (OvsLocal) is negative in all year 3 As the second control variable is correlated with the dependent variable I also calculate the mean value of book value of equity and use it in model (1). The empirical results of using this definition are qualitatively the same. 10

11 regressions and also statistically significant in five of the years examined and indicates that more overseas institutional investors are associated with lower share prices. Finally, as reported, the R 2 varies between 0.35 and 0.52 and the average value for all eight models is The coefficient estimates for the regression models in Table 5 support the hypothesis that lower share prices are associated with investors with smaller investments and vice versa. Moreover, our results support the hypothesis that larger share prices are associated with large well known firms and lower share prices are associated with smaller unknown firms. Our examination of whether overseas investors have different views on share price levels indicates a negative relation between price and relative holding. The results of Table 5 are in general consistent with the investors-recognition hypothesis and the predictions of Merton (1987), that is, firm managers appear to select the optimal share price level for their shares to increase the firm s investor base and thereby reducing the expected return on the share and hence increase the value of the firm. The finding of a negative relation between price and overseas holdings is evidence that overseas institutional investors pay more attention to absolute price levels. Thus, the negative association between share price and local and overseas institutional investors is suggested but not conclusive. 4. Conclusions This paper documents that firms manage their share prices. I present cross-sectional evidence which is consistent with Merton s (1987) investor recognition hypothesis and capital market equilibrium with incomplete information (which results in insufficient diversification among investors and hence a higher expected return). Larger firms are associated with higher share prices whereas the opposite holds for smaller firms. Also, investors with wealth constraint have preferences for shares with low share prices and vice versa. In a simple regression model, the three control variables: (a) firm size, (b) holdings in value; and (c) ownership structure between overseas and local institutional investors explain forty-five percent of the variation in share prices. Overall, I conclude that institutional investors care about share price levels. 11

12 References Amihud, Yakov, Haim Mendelson, and Jun Uno, 1999, Number of Shareholders and Stock Prices: Evidence from Japan, Journal of Finance 54, Angel, James, 1997, Tick Size, Share Price, and Stock Splits, Journal of Finance 52, Benartzi, Shlomo, Roni Michaely, Richard Thaler, and William Weld, 2005, The Nominal Price Puzzle, Unpublished Working Paper. Black, Fischer, 1986, Noise, Journal of Finance 41, Brennan, Michael, and Patricia Hughes, 1991, Stock prices and the supply of information, Journal of Finance 45, Dahlquist, Magnus, and Göran Robertsson, 2001, Direct foreign ownership, institutional investors, and firm characteristics, Journal of Financial Economics 59, Del Guercio, Diane, 1996, The Distorting Effect of the Prudent-man Laws on Institutional Equity Investments, Journal of Financial Economics 40, Dyl, Edward, and William Elliott, 2006, The Share Price Puzzle, Journal of Business 79, Falkenstein, Eric, 1996, Preferences for Stock Characteristics as Revealed by Mutual Fund Portfolio Holdings, Journal of Finance 51, Fernando, Chitru, Vladimir Gatchev, and Pau Spindt, 2006, Ownership Structure, Share Price Levels, and the Value of the Firm, Unpublished Working Paper, University of Oklahoma. Kang, Jun-Koo, and Rene Stulz, Why is there a home bias? An analysis of foreign portfolio equity ownership in Japan, Journal of Financial Economics 46, 2-28 Merton, Robert, 1987, A Simple Model of Capital Market Equilibrium with Incomplete Information, Journal of Finance 42, White, Halbert, 1980, A Heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity, Econometrica 48,

13 Table 1 Summary of Prices and Firm Characteristics on the Stockholm Stock Exchange This table provides summary statistics for stock prices for firms listed on the Stockholm Stock Exchange (SSE) over the sample period 1999 to Stock price, as end of December, is obtained from the SSE. Stock price is calculated as total value of all traded shares divided by number of shares traded during the day. Market capitalization is number of outstanding shares multiplied with stock price at the end of each calendar year. Panel A report summary statistics for the overall period in SEK whereas Panel B report summary statistics expressed in US-dollar. I use the closing price (ultimo) for the exchange rate between US-dollar and Swedish Krona (SEK). Exchange rates are obtained from the Swedish Central Bank (Riksbanken). Panel A: Full Sample, in SEK All Less than 10 SEK to to to to to and above Mean Standard deviation Median Number of firms 2, Proportion of firms, % Panel B: Full Sample, in US-dollars All Less than $5 $5 to $10 $10 to $15 $15 to $20 $20 to $25 $25 to $50 $50 to $75 $75 and above Mean Standard deviation Median Number of firms 2, Proportion of firms, %

14 Table 2 Summary of Firm Characteristics and Institutional Holdings This table provides summary statistics for stock prices (in SEK and US-dollars) for firms listed on the Stockholm Stock Exchange (SSE) over the sample period 1999 to Annual data, as end of December, is obtained from the SSE. Stock price is calculated as total value of all traded shares divided by number of shares traded during the day. Market capitalization is number of outstanding shares multiplied with stock price at the end of each calendar year Panel A: Share Price (SEK) Mean Standard Deviation Median # Firms Panel B: Share Price (US-dollars) Mean Standard Deviation Median Panel C: Market Capitalization (000,000 SEK) Mean 11, , , , , , , ,609.4 Standard 68, , , , , , , ,071.0 Deviation Median 1, , ,719.7 Panel D: Holdings by Local Institutional Investors (%) Mean Standard Deviation Median Panel E: Holdings by Overseas Institutional Investors (%) Mean Standard Deviation Median Panel F: Number of Local Institutional Investors Mean ,035 1,028 1,041 1, Standard 1,553 2,158 2,299 2,556 2,417 2,318 2,126 2,022 Deviation Median Panel G: Number of Overseas Institutional Investors Mean ,017 1,098 1,136 1,133 1,197 Standard 878 1,384 1,535 7,692 8,576 8,375 7,768 7,706 Deviation Median Panel H: Mean Holdings of Local Institutional Investors (000 SEK) Mean 3, , , , , , , ,981.2 Standard 7, , , , , , , ,102.7 Deviation Median 1, , , , , , ,479.2 Panel I: Mean Holdings for Overseas Institutional Investors (000 SEK) Mean 4, , , , , , , ,917.3 Standard 13, , , , , , , ,896.4 Deviation Median 1, , ,

15 Table 3 Holdings, Mean Holdings, Largest Shareholder and Number of Investors This table examine the relation between mean percentage holdings, mean holdings in value, ownership concentration and number of institutional investors based on firm size. I sort firms into three different sizes over the sample period and report mean levels for my control variables. Holdings by local institutional investors are reported in Panel A and overseas institutional investors in Panel B. In both panels, I use a paired t-statistic to examine whether the means are significantly different between large cap and small cap firms (high-low). p-value within parentheses. Panel A: Local Institutional Investors Mean Holdings, % Mean Holdings, SEK (000 ) Herfindahl (vote) for Largest Shareholder Number of Institutional Investors Firm Size Low , Medium , High , ,320 High - low difference (p-value) (<0.001) 9,125.2 (<0.001) 2.66 (0.06) 3,094 (<0.000) Panel B: Overseas Institutional Investors Firm Size Low , Medium , High , ,469 High - low difference (p-value) (<0.001) 9,039.1 (<0.001) 2.85 (0.067) 3,334 (0.000) 15

16 Table 4 Local and Overseas Institutional Holdings Relative to Firm Size and Stock Price Level In this Table, I examine the relation between local and overseas institutional holdings, and their relative holdings (under-/overweighted) based on firm size and price level. I first sort firms into size quintiles each year. Next, I sort them, within each quintile, into quartiles based on stock price levels. I report the mean for the first (low) and 4 th quartiles (high) for levels of holdings and their relative weights for local and overseas institutional investors. I use a paired t-test, assuming unequal variances, to examine the null hypothesis that the difference between the high- and low group is zero for my control variables. * represent statistical significance at the 95% confidence level. Local Institutional Investors Overseas Institutional Investors Firm Size Stock Price Mean Holdings % Mean under/over weighted Mean Holdings,% Mean under/over weighted Size Quintile = 1 Low High * * * Size Quintile = 2 Low High * * * * Size Quintile = 3 Low High * * * * Size Quintile = 4 Low High * * * * Size Quintile = 5 Low High * * * * 16

17 Table 5 Share Prices, Firm Size, Relative Holdings and Number of Investors This table reports cross-sectional estimates of the regression model: Price i,t=α 0+β1Assets i,t+β2hldgs i,t+β3ovslocal i,t+ε i,t where Price is the log of the price of a share in firm i at period t, Assets is log of total assets in firm i at period t, Hldgs is the log of average holdings (in value) of each shareholder in firm i at time t, OvsLocal, is the ratio between overseas to local institutional investors and ε i,t is an error term. The figures reported in parentheses are White (1980) heteroskedasticity consistent t-statistics. **, and *** denote 5 and 1% level of significance respectively. Year α 0 β 1 β 2 β 3 Adjusted F-test # R 2 Firms (7.01) (9.96) (0.74) (0.04) (4.46) (12.86) (1.72) (-3.10) (2.26) (12.40) (2.36) (-3.61) ( ) (13.55) (2.12) (-1.43) (0.6799) (11.30) (2.43) (-2.09) (1.60) (8.81) (3.95) (-2.81) (2.94) (8.02) (3.50) (-1.11) (2.11) (10.72) (2.38) (-2.75) All (5.54) (33.08) (5.83) (-6.08) ,092 17

18 Figure 1 Mean and Median Stock Price on the SSE, 1999 to

19 Figure 2 Median value of relative weighting (under and over-weighted), local and overseas institutional investors, 1999 to ,8 0,6 0,4 0,

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